What does the sale of massive assets by Russia's oil giant to the United States mean?

How U.S. sanctions are reshaping the global oil landscape?

By Fu Jingjun

On January 29, the Russian oil company Lukoil announced on its official website that it has signed an agreement with American private equity firm Carlyle Group to sell its overseas assets (excluding Lukoil’s assets in Kazakhstan), pending approval from the U.S. government. The overseas assets that Lukoil is forced to sell account for about one-third of its total assets, valued at approximately $22 billion. This move is closely related to the significant sanctions imposed by the Trump administration on Russia and will have multiple far-reaching impacts on the global energy landscape and the Russian economy.

The image may have been generated by AI.

Lukoil’s gas station in Krasnodar, Russia.

The U.S. Controls 55% of Global Oil Production

Founded in 1991, Lukoil is Russia’s second-largest oil producer and the largest private oil company, occupying a core position in the Russian oil industry.

In October 2025, the U.S. Treasury Department’s Office of Foreign Assets Control listed Russian oil companies and Lukoil and its subsidiaries on the “Specially Designated Nationals List,” announcing that foreign financial institutions and companies associated with the aforementioned companies would face secondary sanctions. After the enforcement of these sanctions, Lukoil’s stock price plummeted, suffering increasing financial pressure, and its international asset operations were severely troubled, ultimately leading to the decision to divest overseas assets. Lukoil previously intended to sell its overseas assets to a Swiss company but had to seek other buyers due to opposition from the U.S. government.

It is estimated that the most critical part of Lukoil’s overseas assets is a 75% stake in the world-class super giant oil field, West Qurna-2 in Iraq, which has a daily production of about 460,000 to 480,000 barrels, accounting for roughly 0.5% of global daily oil supply. In addition, the company’s overseas assets also include stakes in several oil terminals and retail gas station networks in Europe and North America, as well as multiple upstream and downstream oil and gas projects operated in Kazakhstan, Uzbekistan, Mexico, Ghana, Egypt, and Nigeria. The UAE’s National newspaper cited industry analysts who stated that Lukoil’s sale of assets to American companies signifies Russia’s exit from upstream projects in the Middle Eastern oil industry, giving the U.S. leverage to implement its energy and diplomatic policies.

The Trump administration viewed this round of energy sanctions against Russia as a strategy to advance the Russia-Ukraine peace process, with U.S. Treasury Secretary Mnuchin stating that sanctions targeting the lifeblood of Russian oil could cut off Russia’s funding sources and pressure the Russian side to make concessions on core negotiation topics.

Furthermore, since the Trump administration adopted the “energy dominance” strategy, the U.S. has been comprehensively using economic strategies, diplomatic means, and military power to control global oil resources and energy flows. Following military actions against Venezuela, Trump claimed that including U.S. shale oil and Venezuela’s heavy oil reserves, the U.S. now controls 55% of global oil production. If U.S. companies successfully acquire Lukoil’s overseas assets, it not only means further strengthening U.S. control over global oil production but also signifies the formal beginning of its encroachment on Russian overseas oil assets through sanctions and commercial acquisitions. From the perspective of oil market pricing, the more oil resources controlled by the U.S., the stronger its influence on the global oil market. Currently, the Trump administration is fixated on achieving low oil prices, hoping to alleviate domestic inflation pressures and provide room for interest rate cuts by the Federal Reserve. At the same time, the U.S. aims to strengthen the dollar-denominated global energy trading system by tying oil assets to consolidate the petrodollar repatriation mechanism, thereby curbing the trend of non-dollar settlements in energy trading and solidifying the energy foundation of dollar hegemony.

Europe Accelerates the Process

In terms of sanctions against Russian oil, Europe’s support has further accelerated Lukoil’s divestiture of overseas operations. Previously, Lukoil had laid out several important assets in Europe, including the Petrotel refinery in Romania, the Burgas refinery in Bulgaria, and multiple gas stations in the Balkans. Additionally, Lukoil supplied oil to Hungary and Slovakia through the southern branch of the Druzhba pipeline and provided crude oil for the Turkish STAR refinery owned by the State Oil Company of Azerbaijan. Before the implementation of this round of sanctions by the Trump administration, Hungary and Slovakia were still using the EU’s sanctions exemptions to import large amounts of Russian oil. The cessation of Lukoil’s overseas operations could lead to shortages or even interruptions in crude oil supply for refineries in Central and Eastern European countries.

Despite facing these potential economic losses, the EU is still seizing the opportunity presented by this round of U.S. sanctions to accelerate its decoupling from Russian energy. On one hand, the EU aims to completely sever the remaining energy ties between Europe and Russia while Lukoil is compelled to change the ownership of its overseas assets. The Romanian government has already issued a decree allowing the takeover of Lukoil’s local assets to ensure the stability of its energy system. On the other hand, the EU is coordinating with the U.S. on sanctions against Russian oil. On February 6, the European Commission officially announced the 20th round of sanctions against Russia, for the first time proposing a “comprehensive maritime service ban” on Russian oil, which systematically obstructs the flow of Russian oil in the global shipping system rather than being limited to setting price caps or imposing specific service restrictions. Additionally, the EU will further expand its crackdown on the “shadow fleet,” simultaneously restricting Russia’s ability to acquire new oil tankers.

Russia’s Energy Diplomacy Faces Severe Setbacks

As of now, the transaction between Lukoil and the Carlyle Group is still pending approval from the U.S. government. Regardless of the final outcome, the forced sale of overseas assets signifies the abrupt halt of Lukoil’s overseas strategy and also indicates significant difficulties faced by Russia’s energy industry and economic development.

In terms of oil production and exports, Russian oil companies and Lukoil account for about half of Russia’s total oil output. If we also include the capacities of Gazprom and Surgutneftegas, which have been placed under sanctions during the Biden administration, the sanctioned oil production already accounts for 75% of Russia’s total oil output. The sanctions imposed by the Trump administration have led to a significant decline in Russian oil exports. Under continued U.S. pressure, Russia has had to offer greater discounts to a limited number of buyers or pay higher fees to intermediaries to promote oil exports. Among them, the price of Urals crude oil fell to between $22 and $25 per barrel, with this discount reaching its highest level since early 2023. The sale of overseas assets by Lukoil will also have a significant impact on Russia’s national fiscal revenue. For a long time, the company’s overseas operations provided a considerable and relatively stable profit, which returned to Russia in the form of dividends and corporate income taxes.

Moreover, unlike state-owned enterprises such as Russian oil companies, Lukoil’s investment projects operated overseas for many years have been an important support for Russia’s energy diplomacy and maintaining overseas strength. The forced sale of overseas operations by Lukoil undoubtedly means that Russia’s strategic space in the international energy landscape has been significantly compressed, and its energy diplomacy faces major obstacles.

(The author is a researcher at the Institute of American Studies, Chinese Academy of Social Sciences. This article was completed on March 7.)